Value-Based Programs

Definition: According to CMS, "value-based programs reward health care providers with incentive payments for the quality of care they give to people with Medicare."¹ Value-based programs support CMS' three-part aim, a strategy that targets improved health care at an individual level, improved health of the population, and lower costs.¹

How it relates to ACO/PCMH: One goal of value-based programs is to move away from fee-for-service (FFS) models in favor of ones that reimburse providers and health care organizations based on their patient outcomes, their delivered quality of care, and their ability to control costs.¹ Therefore, various quality metrics play a significant role in the design of these programs, and they focus on improving efficiencies as well as reducing unnecessary services and procedures to control costs.

Another goal of value-based programs is to help patients improve their health, reduce incidence and effects of chronic diseases, and live healthier lives. This is achieved by providing direct patient care and through population management, which includes management of high-risk patients, such as disengaged patients who need chronic care and disease prevention, in the health care system.² Coordinated, team-based care is an important care delivery component of these models. Population management also includes tracking quality and cost measures. Examples of types of value-based models include ACOs and PCMH.

Payment models³: A variety of payment models are currently employed in value-based programs at the federal, state, and local levels. These can include

• FFS with a bonus or penalty tied to quality measures
• PMPM (per member per month) or PMPY (per member per year), often for care coordination or management
• Shared savings—providers and payers share in savings on total health care costs for a defined patient population in a specified time period based on predetermined thresholds. Entities must meet quality metrics to receive shared savings, which can be one-sided (upside) or two-sided (upside and downside).
  • One-sided model—providers and payers share in savings realized when costs are under the cost thresholds but are not penalized if costs are higher than cost thresholds
  • Two-sided model—providers and payers share in savings as described in the one-sided model and are penalized if costs are higher than the cost thresholds. This model is associated with greater risk.
• Bundled or episode-based payment—set payment for a specified episode of care or chronic condition over a specified time period
• Capitated payment—prospective fixed payment to manage some or all of care for a specific population

Involved organizations/oversight: CMS has used these models and others to create many different value-based programs, such as Advanced Alternative Payment Models (APMs) or MIPS.

Resources:

1. CMS. What are the value-based programs? Available at: www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/Value-Based-Programs.html
2. https://www.ahrq.gov/
3. https://www.cms.gov/Medicare/Medicare

Contributing author:

Jelena Lewis, PharmD, BCACP
Chapman University School of Pharmacy

Last Updated 3/24/2021